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2008’s new fad: “rating cliffs” and “credit cliffs”
Do you know what will be all the rage in 2008 in the wake of the subprime crisis? “Rating cliffs” and “credit cliffs” when firms that have seen a slow erosion of their credit will all of a sudden drop like a stone. As I devoted a whole chapter to the subject back in 2003…
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The subprime crisis and the future of securitization
…Echanges is a financial journal published monthly by DFCG, the French association of financial officers and auditors. I was asked by Jean-François Casanova who will be the editor of a special issue devoted to securitization to contribute a piece on securitization in the light of the subprime crisis. Here it is, in an English translation.
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The ABS and Uncle Sam
Mr. Paul Schulten is asking me the following:
“It is true that delinquencies and losses in residential mortgage backed securities (RMBS) are strongly correlated with home price appreciation (HPA) or in the current environment home price depreciation (HPD).
As we enter a period of possible decline in home prices these losses accumulate first to… -
The un-American solution to the subprime mess
Among the remedies mentioned for the subprime crisis, I haven’t seen listed the system I went through when getting a mortgage in England back in those days. Here is how it worked: the first step would be for you to open an account with a building society; then you would start saving, sending a check…
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Since we can’t fix the subprime mess can we at least make sure it doesn’t happen again?
One of the greatest American traditions is for families to get together at Christmas and watch with ever-renewed delight Frank Capra’s “It’s a Wonderful Life.” Recent events in the financial world, and in the mortgage business in particular, suggest that the movie should be introduced with this important disclaimer: “WARNING: The movie you’re about to…
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Now that the housing bubble has burst, who’s to blame?
Blame is flying in all directions: mortgage lenders had stopped bothering whether or not borrowers could repay as they were passing the buck to Wall Street anyway; Wall Street firms were using subprime mortgages of any denomination as innocuous stuffing in Collateralized Debt Obligations (CDOs); regulators failed to curb the worst forms of abuse –…
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Subprime, CDOs and the threat to home ownership
In a well-documented recent paper (*), Joseph R. Mason of Drexel University and Joshua Rosner of Graham Fisher & Co. ask if a chain of events has not begun unfolding that will end up in a situation where funding for the mortgage industry is massively curtailed. In their paper, Mason and Rosner draw a parallel…
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Where did the housing bubble come from?
In today’s Wall Street Journal, Andy Laperrière, a managing director of the Washington office of the ISI Group, wrote a piece on the crisis in the mortgage industry, I wrote to the Journal’s editor, the following letter:
In his “Mortgage Meltdown” (Wall Street Journal, March 21, 2007), Andy Laperrière assigns the residential real estate bubble…
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Malaise in the subprime sector
In today’s Wall Street Journal, Alex J. Pollock a former President and Chief Executive Officer of the Federal Home Loan Bank of Chicago wrote a piece on the subprime industry, I wrote to the Journal’s editor, the following letter:
“In his “Credit Crack-Up” (March 12, 2007), Alex J. Pollock offers a perceptive summary of the…